Developer plans for cheaper housing

BUCKING THE TREND:Highwealth Construction said it would lower prices on two Taipei housing projects by about 25% in hopes of reinvigorating the sluggish housing market

By Crystal Hsu / Staff Reporter

Shares of construction companies tumbled 1.32 percent yesterday, bucking the TAIEX’s 0.42 percent gain, after a major land developer, Highwealth Construction Corp (興富發建設), indicated plans a day earlier to set prices for new housing projects 25 percent lower this year.

The decline came after Highwealth chairman Cheng Chin-tien (鄭欽天) said on Tuesday night the company would lower prices for its presale housing project in Taipei City’s Shilin District (士林) to NT$900,000 (US$29,712) per ping (3.3m2) and another project in Neihu District (內湖) to NT$750,000 per ping.

That means a 25 percent downward revision from their market value last year at NT$1.2 million and NT$1 million respectively, Cheng said, after a spate of unfavorable government policies chilled housing transactions.

“We hope the concessions can help reinvigorate the housing market, which is widely expected to remain sluggish this year,” Cheng told reporters.

Highwealth plans to launch the two presale housing projects in April as the housing market, like Taiwan’s GDP and main stock index, is expected to hit bottom this quarter and start a slow, but steady, comeback from the second quarter onward, he said.

The developer, the second-largest land buyer after Farglory Land Development Co (遠雄建設) last year, reported NT$6.62 billion in pretax profit last year, or NT$9.5 earnings per share (EPS), according to a stock exchange filing yesterday.

The performance, roughly in line with an EPS of NT$9.71 the previous year, may take a dive this year as Cheng said he shared the market consensus that housing prices may fall 15 percent.

“The company will make land destocking its top priority and slow the hunt for new inventory this year, given the high acquisition costs and the increasing difficulty in securing bank loans,” Cheng said.

The developer would not reverse this conservative strategy unless land prices see a correction of 20 to 30 percent, he said.

“We expect other developers will also lower prices to stimulate demand, with substantial land and building inventories sitting on the balance sheet and liquidity pressure mounting,” Primasia said in a note.